Akzo Nobel NV is selling its specialty chemicals unit to U.S. private equity firm Carlyle Group for 10.1 billion euros (US$12.5 billion) in a deal set to transform the Dutch company into a supplier of paints and coatings.
A supervisory board meeting ran late into the night as executives discussed different bids and whether to sell or list the division, Chief Executive Officer Thierry Vanlancker said on a call Tuesday after unveiling the decision. Carlyle and Singapore sovereign-wealth partner GIC edged out rivals by agreeing to keep the business intact and giving assurances on workers’ salaries and benefits.
“Different bids had different dimensions,” the CEO said on the call with reporters. “Carlyle saw it as a strong business as a whole.”
The sale caps a turbulent period for the Dutch manufacturer marked by a $29 billion hostile takeover attempt last year by rival PPG Industries Inc. and the attention of activist investor Elliott Management. Vanlancker, who sought to keep Akzo Nobel’s future in its own hands, will now have to make good on ambitious financial targets set for 2020. These include 50% return on sales and 15% margins, a profitability more in line with peers including its former suitor.
Akzo Nobel shares jumped 4.9% to 78.74 euros as of 9:24 a.m. in Amsterdam as investors digested the terms of the sale. The bulk of the proceeds will be distributed to shareholders, as planned, Vanlancker said. Akzo Nobel made that pledge after its outright refusal to engage with PPG irked some investors, including Elliott. They stand to get an estimated 6 billion euros, according to Bernstein analyst Jeremy Redenius.
The changes afoot at Akzo Nobel extend further than a breakup. The maker of Dulux paint and Cuprinol wood treatments is filling the soon-to-be vacant role of chairman with outsider Nils Andersen, the former CEO of A.P. Moller-Maersk A/S and Carlsberg A/S. He’ll take over from Antony Burgmans, who played a key role in the defense against PPG, battling some investors who pushed for a deal.
Vanlancker said splitting from chemicals will now refresh Akzo Nobel’s “passion” for coatings as the global No. 3 company, and he will make sure the company has the “right size and tools.”
The Financial Times earlier reported that the U.S. private equity firm had won over rivals including a duo of Advent International Corp. and Bain Capital LP, and a group including Apollo Global.
Parts of the specialty-chemicals business are among Akzo Nobel’s most profitable and the division generates about 40% of the company’s adjusted operating income. The unit has a strong position in the commodity chemical chlorine market and products such as ingredients used in personal-care products.
The sale values the unit at 10.1 billion euros including net debt, Akzo Nobel said, adding that it expects to receive a cash payment of 8.9 billion euros. After deduction of expenses and some liabilities, the net proceeds are expected to be around 7.5 billion euros and “the vast majority” will be distributed to shareholders.
By Andrew Noël